Electric dreams
For several weeks, rumours have been circulating on the Internet that
tech giant Apple is planning to build a car. As with all things Apple,
it is apparently being done in secrecy. This rumour has worried even
established car companies, because Apple has a habit of entering a new
industry and disrupting the sales of established players. Apple rival
Google, which is already experimenting on driverless cars, could also be
having plans to build a driverless electric car. This has become a hot
topic at the ongoing Geneva Motor Show.
The traditional motor industry would be foolish to ignore moves by
Google and Apple into car technology, says Fiat-Chrysler boss Sergio
Marchionne. The chief executive of one of the world's biggest carmakers
said the two US companies were “incredibly serious” about their
automotive ambitions. He said their move into driverless technology and
electric vehicles could be “disruptive” for manufacturers.
But should Apple build a car? Would you like to drive an Apple or
Google car? And can Apple really build a car? Apple is said to be
building an all-electric car, which should probably be on the roads (at
least in the USA/Canada) by 2020.
But one thing is clear. If there is one company that has the
financial resources to build a car from scratch, it is Apple. With a
market capitalisation of US$ 750 billion, it is worth more than Daimler,
Volkswagen, Renault, Peugeot, Fiat Chrysler, Ford and General Motors put
together. And Apple is already into cars, through its “connected car”
systems and it is also researching into battery technology, which is
vital for an all-electric car. They even have a code name for the
project called “Titan”.
Newcomer
In case you wonder whether it is possible for a complete newcomer to
build a car from the ground up, think of just two words: Tesla and Elon
Musk. He built an entirely new car brand from scratch and today, you can
see Teslas all over the world, including Sri Lanka. If Tesla can do it,
Apple and other companies can do it too.
Will there be a market for an Apple car ? Five years from now, the
market for electric vehicles will certainly be bigger, with Government
subsides thrown in. Here in Sri Lanka, the duty on electric cars has
been reduced to just five percent and many other countries have similar
incentives. Apple, with its upmarket image, may just be the car brand
for buyers looking for a bit of difference. Moreover, do not forget that
there are Apple fanatics who will buy anything with an Apple logo,
regardless of the price or functionality. Apple may be able to replicate
this magic in the form of a car. But even for Apple, it will not be easy
task considering the logistics, regulations, testing, and manufacturing
processes involved.
Apple is not the only tech company that has tried its hand at doing
something altogether different. Even Apple’s chief competitor Samsung
did build cars at one point. The truth is, it is really difficult to
take on the established players when you are new to the game, even if
you are very good at something else like smartphones.
Smartphones
But there are companies that have succeeded in entering and capturing
a completely different product category. Both Apple and Samsung have
done exactly that with their smartphones. When these two companies began
manufacturing phones, companies like Nokia, Motorola and Blackberry were
the big names in the phone business. Today, Samsung and Apple have
practically captured the smartphone market to themselves, along with
Samsung’s home rival LG, another upstart in the mobile world. Apple
might repeat this feat with televisions too - there is talk that it
plans to enter the big screen TV business as well in a couple of years.
Lamborghini was making tractors when the chief of rival firm Ferrari
challenged it to make a proper sports car. They did make a car - no one
even remembers now that Lamborghini was a tractor maker. PayPal was
originally envisioned as a cryptography company. Nokia was originally a
paper company while Wrigley’s made soap, not chewing gum. Even Colgate,
founded in 1806, started making toothpaste only in 1876, having made
candles until then. Tiffany made paper products, before becoming an
exclusive jeweller immortalised in the hit movie Breakfast at Tiffany’s.
Xerox too was a photo paper company, before introducing the photocopiers
that are now synonymous with the company’s name. Video game maker
Nintendo made playing cards - even its very name means “leave luck to
heaven”.
Accidental
Of course, all companies need a little bit of luck to get by and
succeed. Many companies and individuals made accidental discoveries that
later became their main products. Viagra was envisaged as a heart drug,
when researchers at Pfizer found it had a bigger potential (Pfizer sold
$288 million worth of the little blue pill in the first quarter of
2013). Even penicillin was an accidental discovery. The microwave was an
accidental invention by Raytheon, a weapons contractor. Both fastening
system Velcro and non-stick coating Teflon are accidental discoveries.
The inventor of Coca Cola was just looking for a headache cure.
Either way, doors open for bigger opportunities if a company is
willing to take a risk. Companies such as Apple have luck on their side
and are willing to take a risk. Making and marketing a new product is a
gamble, but one that could pay off handsomely if that product becomes
successful. Apple has done it earlier and perhaps it wants to try its
hand at a different industry again. It is just that the car industry is
not just another industry. It is extremely difficult for a newcomer to
break into the automotive market, given its dynamics, brand loyalties
and regulations.
Trends
But the entry of Apple and Google to the automotive industry will be
good news for the consumer if they get the pricing right and for the
environment, because they are likely to launch non-polluting electric
vehicles. That is where the future lies and both companies have a good
track record of reading and riding on future trends. |